Backtracking on CO2 targets bad for economy

11th October 2011

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  • Mitigation ,
  • Carbon Trading ,
  • Central government



Government plans to review the UK's carbon budgets is a mistake that could harm the country's ability to reap the rewards of shifting to a green economy, warns the Environmental Audit Committee (EAC).

In publishing its latest report on carbon budgets and their potential impact on the UK, the EAC labelled the coalition’s attitude towards climate change as schizophrenic, arguing that the planned review of the UK’s commitments to cut carbon emissions in 2014 could harm investment in low-carbon technology.

“Five years on from the Stern report the Treasury still doesn’t get climate change – or the risk it poses to global stability and economic prosperity,” said Joan Walley MP, chair of the EAC.

“While the prime minister is to be commended for not faltering when setting the fourth long-term carbon budget, he risks throwing the UK’s climate targets off-course by instigating a review in just three years time that could overturn the commitment.”

Fellow EAC member Zac Goldsmith MP warned that ministers must realise that “with the stroke of a pen, they can make a good investment bad”.

“The one risk that all investors highlight when they consider putting funds into clean technology is policy change,” he said. “Unless [policymakers] provide real long-term certainty, the transition to a low-carbon economy will be slower and bumpier than it needs to be.”

In June, the government adopted the recommendations of the Committee on Climate Change to ensure CO2 emissions are cut by 50% on 1990 levels as a part of the fourth carbon budget (2023-37), but at the same time announced it would review the targets in 2014, to ensure they were not more demanding that those being achieved in Europe.

However, the EAC report warns that the 50% target is the minimum the UK needs to ensure it can cut emissions by 80% by 2050 and that international discussions are building the case for more, not less, ambitious targets. Green investment, it says, is a win-win solution to the country’s financial difficulties and the 2014 review brings into doubt the future direction of CO2 cuts, and risks weakening investor confidence.

Manufacturing trade organisation the EEF reacted the EAC’s comments by defending the need for the review of carbon budgets.

“The chancellor last week highlighted the need to avoid moving faster than our competitors,” said Steve Radley, EEF director of policy. “The government must now review the carbon budget targets in 2014 so that any target adopted reflects what is achievable and, at a cost which can be sustained.

“Damaging the UK economy without achieving significant global reductions in emissions is not the way forward. The UK must provide a leadership role that shows decarbonising and growing the economy can go hand in hand.”

The deputy-general of the CBI, Dr Neil Bentley, agreed that the review was sensible.

“We want an economy that is low-carbon and competitive,” he said. “A review … will ensure the UK doesn’t get out of step with European competitors, but what’s really important is that the government delivers a clear framework for companies to invest with confidence.”

Bentley’s comments followed his speech last night at the CBI’s international Green Business Dinner, where he argued that British businesses want to tackle climate change, but are being hampered by government’s failure to provide policy certainty.

He warned that government’s drive to transition to a low-carbon economy as a way of improving international competitiveness has back fired.

“We wanted first-mover advantage,” he said. “We acted without realising what was around the corner economically. So today, despite our green ambitions, economic and political realities bite. We find ourselves not ahead of the pack, but out on a limb.

“We’ve got no international deal, no global carbon price, no meaningful EU price and the UK tying itself in costly green policy knots. The UK is in danger of straining to hit its targets but missing the point: that we need an economy that’s low carbon and competitive.”


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